Auto Enrolment

What is Auto Enrolment?

Auto enrolment is the Government’s approach to the growing pension problem in the UK. Previous attempts of encouragement have now been abandoned and replaced by the Government’s compulsory programme of ‘automatic enrolment’ into a pension scheme. Every employer has been given a ‘staging date’. This is the date an employer’s auto enrolment duties come into effect.

What’s it all about?

Employees are reluctant to pay towards their own pensions and employers have been put off by the costs involved in setting up a pension scheme for them. Now employers have no choice, the Government is forcing them to establish pension schemes so that employees are compelled to save for their retirement. Even those employers that already have pension schemes must check that they meet the minimum requirements of auto enrolment.

Logistics...

You need to undertake the following:

Start you declaration of compliance

Establish your staging date

Assess your workforce

Tell each of them into which category they fall (see later)

Find a suitable pension scheme

Auto enrol the eligible members on the staging date

Tell the non-eligible and entitled workers what it means to them and why

Provide information

Keep records

Collect contributions

Submit your declaration of compliance

Who does this affect?

As an employer, you are mainly interested in those who are eligible for auto enrolment, as follows (in respect of this fiscal year)

For automatic enrolment, employees fall into three categories depending on age and salary. Employees who already belong to a qualifying workplace pension scheme are not eligible for automatic enrolment.

The minimum contributions are shown in the table below. Currently the total minimum contribution is 2% with at least 1% being the employer’s contribution. The percentages are based on the earnings of the employee and, depending on the pension scheme’s rules; they may or may not take into account bonus or overtime payments.

Minimum contributions are being introduced gradually, increasing over time.